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U.S. rice prices could be headed higher in 2017-18

U.S. rice producers could see higher prices for their 2017 crops – and it’s not mainly because of the losses due to the flooding that occurred in portions of Arkansas, Louisiana and California in late April and early May.

“The long-grain rice price forecast is up about $1 per hundredweight – around $9.70 to $10.70,” says Nathan Childs, who follows the U.S. and world rice markets for USDA’s Economic Research Service in Washington. “This is based on without factoring in the flooding that occurred in Missouri and Arkansas.”

Dr. Childs, an agricultural economist with the USDA-ERS, was one of the speakers for the University of Arkansas System Division of Agriculture Rice Outlook Webinar on May 25. (To view Dr. Childs’ presentation, click on https://youtu.be/D9CjbB4CU_Q.)

“You can see prices have been dropping, dropping for a while,” said Dr. Childs, referring to a chart showing season-average prices for long and medium grain rice going back to the 1990s. “But now we’re beginning to see tighter supplies in this country and in some other parts of the world.”

No shortage of rice

That doesn’t mean there will be shortages of rice anytime soon. Although global rice production is expected to decline 250,000 tons to 481.5 million tons on a milled basis, 2017-18 global rice supplies are projected to be a record 599.9 million tons, which would be up 2.6 million tons from 2016-17.

“I look at the all rice ending stocks, and, as I said earlier, we came off three years of abnormally high global ending stocks with high stocks-to-use ratios of 24 percent to 25 percent,” he said. “That’s too high.”

The stocks-to-use has come down and is projected to fall below 20 percent in the 2017-18 marketing year. “We have a lot of rice,” said Dr. Childs. “Historically, we've said around 13 or 14 percent was a more desirable long-term stocks-to-use ratio.”

The U.S. crop was already forecast to be down about 10 percent on a metric-ton basis in 2017 before the flooding began having an impact in the Mid-South, including the states of Arkansas and Louisiana, and in California.

USDA’s National Agricultural Statistics Service was forecasting U.S. rice plantings would be down 17 percent in its March 31 Planting Intentions Report. (The forecast was for 2.63 million acres with most of the decline in the South and a slight decrease in California. Arkansas and Mississippi producers indicated the biggest declines.)

Prices in decline

“Prices at planting this year, say in March, were declining so U.S. long-grain rough prices were declining,” said Dr. Childs. “They have been rising in the last few weeks because weather is a big factor, but they were declining.”

In contrast, prices for soybeans, the main alternative crop in the Delta, were rising at the time. “And in March, the U.S. carryout for the 2016-17 rice crop was the highest in more than 30 years. Now it's not as high now. We've dropped it a little.”

Meanwhile, total supplies are still projected the second highest on record. “So when farmers were looking at 2017-18 they saw declining long-grain prices, big carryout, big supplies but not record and higher prices for alternative crops.”

The weather and uncertainty in portions of the U.S. Rice Belt have altered that outlook somewhat, but the U.S. still faces record supplies in the rest of the world where it exports about half its rice crop. Dr. Childs reviewed the situation in a number of rice-producing countries.

“Egypt, not a huge producer but a major exporter of medium-grain rice, is down about 17 percent due to contraction of area, tight water supplies, more restrictions on area and also alternative crops that are more profitable,” he said.

Normal yield for India

India could be down 500,000 tons, which sounds like a lot but is actually closer to a normal yield for that country. “Although it should be down about a half million tons, it's still a bumper crop,” Dr. Childs said.

South Korea will be down in area and yield. “Area has been dropping in South Korea for well over two decades,” he said.

In other countries where supplies may be down:

Madagascar is having bad weather – drought in one region, flooding in another, so the crop will be down.

Japan down with continued area decline that's probably been occurring more than 30 years.

Indonesia down slightly on smaller area but not much.

Brazil, the crop is projected down but the area is expected slightly higher. “They will have a better second crop and some pastureland might go to more rice,” he said. “We view a more normal yield than last year's yield, which was abnormally high.”

Burma down a little. A normal yield with no change in area.

Cuba, drought, weather problems in the Caribbean, down around 63,000 tons or a decrease of almost 15 percent.

Looking at areas with increases in production, Sri Lanka is expected to see recovery of lost yield. “It's a record crop in Sri Lanka, big recovery,” said Dr. Childs. “It had drought and flooding last year. One crop was impacted badly by drought and the other by flooding but Sri Lanka bounces back by 950,000 tons or 40.4 percent.”

Thailand is recovering from severe drought, which is helping restore Thailand to its position as the world's No. 1 or 2 exporting country and a large producer. Production is forecast to be up 900,000 tons or 4.8 percent.

China production up slightly

China’s production is up by 150,000 tons, a record, but by a small amount. “That's a minor increase,” he said. “It looks like a lot. But China is the largest grower in the world. It's just a tiny increase; more due to rounding.”

Paraguay’s crop is a record. “Paraguay has tripled production in the last three years,” said Dr. Childs. “Ten years ago I would not list Paraguay's production. But it's up 141,000 tons or 28 percent. It had a poor crop last year, but it's been on a decade-long expansion, and all of the expansion virtually is going into exports.”

Guyana’s crop is projected up 23 percent to a record. Guyana has also made tremendous increases in the last few years in production and pushing its exports out.

Colombia’s crop is recovering somewhat; Bangladesh’s will be a record, due to higher yields; Pakistan’s will be up a slight amount; and Cote d'Ivoire production is up. “Cote d'Ivoire is like Paraguay,” he said. “It's virtually tripled production in the last decade or less. We’re seeing lots of increases in production.”

Dr. Childs said Latin America remains the largest regional market for U.S. rice by far with Mexico accounting for a large portion of those sales. Mexico now purchases more than 800,000 tons of U.S. rice annually.

Low-growth area for U.S.

“Actually I would not see much growth in Latin America simply because we're extremely high right now in what we sell them now,” Dr. Childs noted. “We’re doing very well in sales to Mexico. It will remain the top market for U.S. rice.”

Dr. Childs confirmed that China is expected to export rice, much of it to Northeast Asia and some low quality rice into Africa. They ship some to North Korea and Japan, most of it medium-grain.

In response to questions from Bobby Coats, professor of economics with the University of Arkansas, and the moderator of the webinar, Dr. Childs said Iraq remains an “erratic” buyer of U.S. rice. (Dr. Coats also writes the weekly Market price considerations feature for http://deltafarmpress.com.)

“It's almost impossible to predict,” he said. “Several times this year it was thought that the U.S. was going to sell. When the U.S. sold, it wasn't necessarily predicted. It's just a very difficult market to predict.

“I believe that they are certainly a price-conscious buyer. They are a big buyer, well over a million tons. The U.S. has sold almost none this year. Back in 2015-16, I believe, the U.S. was close to 150,000. It was a major buyer then. Since then, they have been virtually absent.”